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Merkel and Sarkozy locked in talks to avert eurozone meltdown

October 10 2011, 1:01am, The Times

Angela Merkel wants eurozone bailout funds used as a last resortFrancois Lenoir/Reuters

The leaders of France and Germany will try to find common ground yesterday on a plan to recapitalise Europe’s banks in the face of a damaging credit squeeze and potentially huge losses from Greece’s inability to pay back its debts.

Officials were said to be working furiously to work out a compromise between Angela Merkel, who wants eurozone bailout funds to be used as a last resort, and her guest Nicolas Sarkozy, who is increasingly worried about the exposure of French banks to Greece, Spain and Italy.

The French President wants to tap the €440 billion (£378 billion) European Financial Stability Facility (EFSF) for bank credit, while Mrs Merkel believes that to be the job of the French state or private finance market.